What is the scale of China's foreign exchange reserves and how will it develop in the future?

With people's life getting better and better, many people have begun to contact with foreign exchange. How about the scale of China's foreign exchange reserves? How will the future trend develop? Today, I'm going to give you science popularization. If you're interested in it, let's get to know it~

According to the data released by the State Administration of foreign exchange, as of the end of March 2019, the scale of China's foreign exchange reserves was 3098.8 billion US dollars, an increase of 8.6 billion US dollars compared with the end of February, realizing the "five consecutive rises". Analysts pointed out that behind the "continuous rise of foreign reserves" is the support of China's stable and sound economy, reflecting the improvement of foreign investors' confidence in China's market. In the future, the scale of foreign exchange reserves may fluctuate up and down, but the general trend of overall stability will not change.

1、 Up $45.7 billion in five months
Since the end of the "three consecutive falls" in November last year, the scale of China's foreign exchange reserves has rebounded for five consecutive months, with a cumulative increase of US $45.7 billion, or 1.5%.
Zhao Xijun, vice president of the school of Finance and finance of Renmin University of China, analyzed to our reporter that the continuous rise of foreign exchange reserves in the last five months is the result of the comprehensive influence of various factors, including maintaining the trade surplus, accelerating the inflow of foreign capital, rising asset prices of reserve investment, and the balance of supply and demand in the foreign exchange market.
Zhao Xijun further pointed out that in addition to us dollar assets, China's foreign exchange reserves also have some non US dollar monetary assets such as sterling, euro and Japanese yen. Judging from the situation in the last two months, the continued rise of the US dollar index has led to a decline in the valuation of non US assets. However, since the beginning of the year, the monetary policies of major countries in the world have been relaxed, which has promoted the prices of various assets including stocks and bonds, which has become one of the main reasons for the rise of foreign exchange reserves. According to the analysis of the reasons for the change of the scale of foreign exchange reserves, asset prices have risen to varying degrees in recent five months, which has promoted the increase in the valuation and balance of foreign exchange reserves.

Xie Yaxuan, chief Macro Analyst of China Merchants Securities, said that after the investment of foreign reserve assets, the balance of foreign reserves will naturally increase. "Interest income is expected to exceed 100 billion US dollars this year, so the scale growth of about 10 billion US dollars per month is the normal result."

The more rational purchase of foreign exchange by residents, not blindly buying foreign exchange, is also regarded as one of the reasons for the rise of foreign exchange reserves. According to the data of the foreign exchange bureau, from January to February, personal foreign exchange settlement and sales remained basically stable, and the net foreign exchange purchase decreased by 19% year-on-year.

Liu Jian, a senior researcher at the financial research center of Bank of communications, believes that China's exports may improve significantly in March, the foreign exchange market is expected to be stable, and the supply and demand of foreign exchange continue to improve, all of which will contribute to the growth of foreign exchange reserves.


2、 Global capital is optimistic about China market
"Although the external environment is unbalanced and there are many uncertain factors, the sound fundamentals of China's economy provide a solid foundation for the stability of the scale of foreign exchange reserves." Zhao Xijun said that the stable and positive economic fundamentals have brought positive and stable expectations to foreign investors, attracting them to increase their investment in China's real economy and capital market, and supporting the rise of foreign exchange reserves.
Since the beginning of this year, China's economy has been warm, and many indicators have shown positive changes: in the first two months, fixed asset investment has risen steadily, consumer confidence index and manufacturing new order index have increased significantly, and capital market transactions have been active; in March, the average daily electricity generation and reception growth has reached double-digit, and the growth of import and export and freight transportation has accelerated; in particular, the purchasing manager index of China's manufacturing industry in March The PMI of manufacturing industry rose to 50.5% after being below the critical point for three consecutive months, and the non manufacturing business activity index rose to 54.8%.
China's economic recovery and other factors have pushed the stock market to record gains in the first three months, and foreign investors are once again keen on Chinese stocks, the German Business Daily reported recently. The stock market's rise was supported by a sharp rise in China's manufacturing activity index, which eased concerns about China, the world's second-largest economy and the main growth engine of the global economy, AFP said.

Data show that since this year, the capital inflow into a shares through the Shanghai and Shenzhen Stock connect has exceeded 100 billion yuan. According to a recent report issued by the international financial association, the net inflow of China's stock market will reach US $105 billion and US $111 billion respectively this year and next.

Besides the stock market, bond market also attracts a lot of foreign capital. Since April 1 this year, China's bonds have been officially included in the global composite index. The industry expects that the full inclusion of the index will bring at least 100 billion US dollars of capital inflow to China every year.

The report of the international financial association also predicts that the international capital inflow to China will reach about 575 billion US dollars this year, and China will continue to be a key driver of capital inflows from emerging markets. CNBC of the United States also reported a few days ago that all the signs indicate that more funds are flowing into the Chinese market this year.

3、 Maintain overall stability in volatility
For the next trend of foreign exchange reserve scale, Zhao Xijun believes that maintaining overall stability in the fluctuation will still be the basic trend. First, the current international environment is still complex and severe, and the global economic situation and financial market uncertainty have increased; second, China's economy is still expected to maintain a high growth rate of more than 6% this year. At the same time, China will continue to implement positive fiscal policy and prudent monetary policy, deepen market-oriented reform and expand high-level opening-up, which will help to enhance the confidence of global investors to enter the Chinese market To maintain the stability of cross-border capital flows and the independent balance of payments.

Wang Chunying, chief economist of the safe, pointed out that substantial progress has been made in Sino US economic and trade negotiations and the obvious weakening of the Fed's expectation of interest rate hikes are also conducive to stabilizing market expectations.

Liu Jian predicts that in April, the yield of US Treasury bonds will rebound to a certain extent. The improvement of us short-term economic data will drive the US dollar to shake and strengthen. The valuation of bonds and exchange rate may be negative, and the growth rate of foreign reserves may shrink. However, with the improvement of the relationship between supply and demand of foreign exchange, capital inflow may remain net, which helps to stabilize the scale of foreign exchange reserves.

Zhao Qingming, chief economist of China Financial Futures Exchange Research Institute, also believes that the scale of foreign exchange reserves will remain stable in the future, "a small increase or a small decrease. For some time in the future, the balance will be stable as a whole."

Wang Chunying said that in the face of the complex and changeable international economic and financial situation, China will continue to further promote the structural reform of the supply side and maintain the economic operation in a reasonable range. At the same time, with the increase of RMB exchange rate flexibility, the function of "automatic stabilizer" of exchange rate gradually appears, which is conducive to the stability of China's foreign exchange reserve scale.

The above is the answer to the question "what is the size of China's foreign exchange reserve and how will it develop after that?" I believe you have already known it. We will present more financial information~

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